June 30, 2011

Seven insights from the HomeAway IPO

Vacation-rental company HomeAway went public on NASDAQ yesterday, and it was an impressive public market debut. Shares in the company surged 49 percent in the first day of trading, closing at $40.21. So, is this just another internet company taking advantage of a small float for a big exit? Or, is HomeAway the real deal? Let’s take a look at seven things you need to know about this hot IPO:

1. A big raise: HomeAway raked in $216 mn in capital yesterday, after selling its shares at the high end of its pre-IPO range.

2. Impressive valuation: when the closing bell clanged, HomeAway wound up with a valuation of $3.2 bn, fed by the 49 percent price spike throughout the day.

4. Great expectations: investors seem to have high hopes for HomeAway. The $3.2 bn valuation is 19X last year’s revenue. Compare that to Priceline at 8.1X and Expedia at 2.3X (with valuations of $25 bn and $7.8 bn, respectively).

5. Predictable isn’t boring: why is HomeAway’s valuation so generous? The CEO, Brian Sharples, believes it’s because of the company’s consistent growth and the fact that property owners and managers – rather than vacationers – pay to use the service.

6. Solid revenue growth: more than 90 percent of its $168 mn in revenue came from property owners and managers. Revenue increased $48 mn (40 percent) from 2009 to 2010. The company has been around since 2005.

7. Global reach: HomeAway has more than 560,000 property listings, representing more than 145 companies. It operates 31 websites.